Trusts and foundations for expats

Trusts and foundations for expats are one of the most effective ways to protect your assets and minimise your liability for UK inheritance tax. Don’t let their reputation for complexity put you off—with the right advice from an experienced professional, you’ll be able to achieve the peace of mind that comes from knowing your loved ones will receive the maximum benefit from your estate.

Whatever your situation, our experts have the experience to guide you to the right solution. Trusts and foundations for expats will help your assets grow at the same time as protecting them. We’ve designed them to be easy to set up, with a minimum of administration. In return, they offer you substantial benefits and reassurance. They represent the best way of passing your wealth intact through the generations, while allowing nominated beneficiaries to enjoy their benefits.

What is a trust?

A trust is created when an individual, known as the ‘settlor’, transfers assets via a trust settlement or agreement into the ownership of appointed trustees. The trustees are tasked with administering the assets in the trust fund on behalf of the trust’s beneficiaries.

Assets that can be transferred into a trust include:

Stocks and shares in quoted and unquoted companies

Investment portfolios

Real and intellectual property

Bank deposits

Life assurance policies

An international trust can last for a maximum term of 100 years. It can be wound up at any time once its purpose has been satisfied, but otherwise it is irrevocable.

The benefits of placing assets in a trust

Creating a trust is a tax-efficient method of ensuring that the maximum portion of your estate possible is passed on to the beneficiaries of your choosing. In most circumstances, a trust is not liable to tax as long as the beneficiaries are not resident where the trust is located.

Trusts are particularly relevant to expats who reside in countries which decree by law how an estate should be divided up. Putting your assets in a trust can allow you to determine how your money is apportioned. Trust law has specific provisions to help avoid problems caused by laws of forced heirship.

The benefits of creating a trust can include:

The protection of assets

Deferring or mitigating tax liability

Creating or maintaining anonymity

Efficient inheritance planning

Protection for assets that may not be easily divided between beneficiaries

Once you’ve established a trust, any investment earnings accruing to the assets within it will fall outside your estate with regard to UK inheritance tax. Should you live for seven years from the date the trust is established, it’s possible that all the assets of the trust will avoid inheritance tax.

What is a foundation?

The majority of foundations are set up to protect the founder’s assets and to reduce tax liability. They are often associated with charities, but the majority of them have nothing to do with charities.

They differ from trusts in that they have no actual owners, simply a board of officers appointed to administer them.

Foundations can own all types of assets, including:

Stocks and bonds

Real estate

Patents and rights

The term of a foundation is unlimited, though certain requirements or specifications may be fixed in its articles. Such specifications cannot be revoked or altered at any time, even after the death of the founder. This ensures that his or her wealth is only ever granted in accordance with his or her wishes.

The advantages of establishing a foundation

The main benefit of a foundation is that, once the founder’s assets have been transferred into a foundation, he or she no longer owns them. This means that the founder does not have to declare them for tax purposes. Furthermore, as the founder no longer owns the assets, this has implications in cases of bankruptcy, divorce or third party claims.

As a foundation legally has no owner, the Founder’s relatives and other third parties have no claim on the foundation and do not even have to be informed of its existence.

The main advantages of forming a foundation are:

The founder can transfer assets into the foundation, after which he or she no longer owns them

Assets belonging to the foundation cannot be seized

Potential inheritors can’t make claims against the foundation

Foundations operate tax free

Foundations do not have to be charitable or non-profit making

As ex-patriates of some 25 years standing we have lived in many countries and consulted a number of different companies about our financial affairs. Now as clients of PWI we have finally found the ‘peace of mind’ we have been looking for. PWI expertise, attention to detail & personal service is the best we have ever encountered. We are very happy with our investment results and improved level of income. The ‘passing on’ of our assets to our children & grandchildren is very important for us and PWI has helped us to plan intelligently both for today and for the future.Mougins, France & London UK